The video game industry is consolidating

Hi everyone, it’s Jason. This week, Epic Games announced plans to buy Tonic Games Group, creator of the hit Fall Guys. This is another in a long series of recent video game acquisitions and growing evidence that the $ 180 billion industry is consolidating. In fact, it has become almost impossible for independent game companies to survive.

Just a few years ago, the big-budget video game industry was complemented by a number of independent companies capable of creating success with fewer resources and more creative risk. Double Fine Inc., which employed less than 100 people, was known for an eclectic mix of artistic titles. Obsidian Entertainment Inc. had a reputation for creating complex and deep role-playing games.

But the two companies had to face financial difficulties. They were often hired by editors on work-for-hire projects, leaving their fates tied to the whims of whatever executives wanted in a given quarter. Losing a contract could be devastating, leading to layoffs and budget cuts. So it was no surprise to see them both engulfed by Microsoft Corp .: Obsidian in 2018 and Double Fine a year later.

Even large publishers are not immune. Last fall, Microsoft bought ZeniMax Media Inc., the parent company of Bethesda Softworks, in a $ 7.5 billion transaction. ZeniMax, which released several commercial flops such as Prey and Fallout 76, has reportedly been looking to sell for years. It was the only major American game publisher not to be publicly traded.

Which brings us to Tonic Games, whose subsidiary Mediatonic enjoyed a wave of success last year thanks to Fall Guys, one of the most popular online games of the pandemic. It was addicting, satisfying, and the perfect way to interact with strangers during extended lockdowns.

But Mediatonic has struggled to keep the game’s momentum going, even with a wave of hiring and new features planned. Rather than risk further player abandonment and potential financial uncertainty, the studio executives sold out to Epic, one of the richest game companies in the world. This move will likely result in faster and more regular updates for Fall Guys that Mediatonic could never have developed on its own.

Even though the video game industry exploded during the pandemic, making games has always been a risky proposition. Customers can be fickle, development costs have increased exponentially, and ideas that seemed unique at the start of development may have become ubiquitous once a game is finished, three or four years later.

The landscape can be difficult to navigate, even for the most successful independent developers. Companies that were otherwise stable, like Gearbox Entertainment Co. and Insomniac Games, have also been sold in the past two years.

Consolidation appears to be a win-win solution. Sellers can ensure stability, while buyers get more content to serve a fan base hungry for new games. But there are also costs. An industry dominated by a handful of large corporations could eventually lead to creative stagnation and other symptoms of monopolization, like limited choices and higher prices.

It’s great to see developers succeed financially, but it’s hard not to worry about the long-term ramifications for fans and video game makers. By the time we see the results, it may be too late. – Jason Schreier

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